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Governor Romney's release of his final 2011 tax return and an affidavit from his accountant that he'd really paid tax in prior years provoked a feeding frenzy from the press and the blogosphere, despite the fact that there was almost no news. His final return was not much different from the unfiled version posted earlier, except for this:

The Romneys voluntarily limited their deduction of charitable contributions to conform to the Governor's statement in August, based upon the January estimate of income, that he paid at least 13% in income taxes in each of the last 10 years. (Source: FAQ on MittRomney.Com)

I find that part interesting. Gov. Romney voluntarily imposed a kind of Buffett Rule on himself. Recall that the Buffett Rule, as stated by President Obama, was the principle that millionaires should not pay lower tax rates than their secretaries. This was codified in the Senate as a minimum effective tax rate of 30%.

Gov. Romney has apparently decided that the minimum tax should be 13%, so I guess both parties have agreed on the principle and are bickering about the rate. (Or, perhaps, Gov. Romney misheard "thirty" as "thirteen." Romney's physician's letter, also released yesterday, makes no mention of hearing loss, although the doctor does seem confident that Gov. Romney will be the "next president of the United States.")

Josh Barro has pointed out that the Governor can file an amended return to claim the unused charitable deductions, so he views the voluntary tax reduction as a kind of campaign donation--and one that will be paid back if the candidate loses and people lose interest in his tax returns and campaign promises.

“I don't pay more than are legally due and frankly if I had paid more than are legally due I don't think I'd be qualified to become president. I'd think people would want me to follow the law and pay only what the tax code requires.” [emphasis added]

So, earlier in the week, the candidate writes off half of voters and a big chunk of his base. Yesterday, he did something that he had earlier said would disqualify him for the presidency. Do you think that, perhaps subconsciously, the Governor is deliberately trying to undermine his candidacy? (The physician's letter also did not comment on Romney's mental health.)

But, if I may digress into substance for a moment, there is one point that I think most reporters have missed about Mitt Romney's tax returns: he pays much, much less than a 15% rate on his capital gains. Most observers have noted that the 13 or 14% rate that the Governor pays reflects the fact that most of his income comes in the form of capital gains and dividends, both of which are taxed at a maximum rate of 15%.

However, Romney was able to avoid capital gains tax entirely on nearly $1 million of assets simply by donating them to charity. He reported $920,573 of noncash donations to his foundation, all of which were shares of appreciated stock. If the Romneys had sold the shares, they would have had to pay tax on any accumulated capital gain. By donating the shares directly to charity, they saved potentially tens of thousands of dollars (depending on how much the assets had appreciated in value). And they got the charitable deduction on top of that.

An even bigger capital gains loophole is what columnist Michael Kinsley has called the "Angel of Death loophole." If you hold onto appreciated assets until you die, the capital gains are never taxed. Your heirs get to pretend that they bought the asset on the day you died. Heirs will avoid $44 billion in tax through the Angel of Death loophole in FY 2013 according to Congress's Joint Committee on Taxation. Presumably, the Romneys are planning to take advantage of it too.

All of these techniques are perfectly legal. And they are one reason why wealthy taxpayers can pay much lower effective tax rates on their capital gains than the advertised rates. And the very light taxation of capital gains is more than an issue of equity. It surely results in much economically unproductive tax sheltering activity.